3-month report january 1 – march 31 q1 2012 · epigenomics 3-month report 2012 interim...

3-MONTH REPORT

Q1 2012JANUARY 1 – MARCH 31

in EUR thousand (unless stated otherwise) Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012

Income Statement

Revenue 621 364 257 195 243

Gross profit 472 264 204 140 194

EBIT -2,740 -2,975 -5,032 -4,498 -2,301

EBITDA -2,579 -2,789 -3,829 -1,742 -2,006

Net loss for the period -2,890 -3,011 -4,816 -4,858 -2,338

Balance Sheet (at the respective reporting date)

Non-current assets 5,471 5,598 5,352 4,042 3,735

Investments in non-current assets1 95 61 197 35 12

Current assets 25,712 22,693 19,395 15,421 12,815

Non-current liabilities 0 0 0 0 0

Current liabilities 2,615 2,700 4,126 3,277 2,541

Equity 28,568 25,591 20,621 16,186 14,009

Equity ratio in % 91.6 90.5 83.3 83.2 84.7

Total assets 31,183 28,291 24,747 19,463 16,550

Cash Flow Statement

Cash flow from operating activities -2,836 -2,416 -2,019 -1,840 -2,543

Cash flow from investing activities -182 -388 -1,002 -1,270 -12

Cash flow from financing activities -7 -2 -46 11 -25

Net cash flow -3,025 -2,806 -3,067 -3,099 -2,580

Cash consumption -3,018 -2,804 -3,021 -3,398 -2,555

Cash and cash equivalents at period's end 21,529 18,723 15,656 12,557 9,977

Stock2

Weghted average number of shares issued 8,818,417 8,818,417 8,818,417 8,818,417 8,818,417

Earnings per share basic and diluted (in EUR) -0.35 -0.35 -0.55 -0.52 -0.27

Share price (in EUR) at period's end 8.95 5.95 4.26 1.30 2.22

Number of employees at period‘s end 85 84 77 61 46

1 Excluding capitalized development costs.

2 In order to ensure comparability, the figures for Q1 2011 und Q2 2011 have been adjusted retroactively in a 5:1 ratio.

QUARTERLY DEVELOPMENT OF KEY FIGURES (UNAUDITED)

1INTERIM CONSOLIDATED MANAGEMENT REPORTEPIGENOMICS 3-MONTH REPORT 2012

INTERIM CONSOLIDATED MANAGEMENT REPORT

CONTENTS

Dear Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Main Events During Q1/2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Our Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Supplementary Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Opportunities and Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Prognosis Report for 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Group Income Statement and Statement of Income and Expenses Recognized in Group Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Group Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Group Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Statement of Changes in Group Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Notes to the 3M 2012 Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . 13

Basic Information, Principles and Methods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Notes to the Group Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Notes to the Group Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

Notes to the Group Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

DEAR SHAREHOLDERS,

During the first quarter of 2012, we have made further progress with our colorectal cancer screening assay, Epi proColon®. We have mean-while initiated the FDA registration process, embarked on our final clinical study necessary for the submission and have also entertained an active and fruitful dialog with screening guideline setting groups and reimbursement authorities. A major accomplishment in this area has been the inclusion of Septin9 testing into the CPT coding document issued by the American Medical Association in 2012, where Septin9 testing is now explicitly included with its own code for possible future reimbursement. Furthermore, several studies with external academic collaborators have shown the utility and the potential of our DNA- methylation-based diagnostic product. At the same time, we remain encouraged to see that there is a growing market acceptance for our test in North America with more than 26,000 Septin9 tests being performed in 2011 by our license partners.

It remains Epigenomics’ ultimate goal to introduce Epi proColon® as an IVD diagnostic test to the largest commercial market for molecular diagnostic products in the mid-term future. We therefore will keep taking all necessary steps to ensure that on Septin9-targeted detection of colorectal cancer is broadly introduced into markets – not only in North America, but worldwide – in order to bring the benefit of this convenient blood-based testing alternative to the benefit of doctors, patients and the healthcare system altogether. At the same time, this year will be a crit ical year to secure the future of our business, since the scarcity of funds might pose a threat to the execution of our plans. We are therefore cur-rently evaluating all options available to the Company, including the possibility to secure additional financial resources through a capital market transaction.

Yours sincerely

Geert Walther Nygaard Dr. Thomas TaapkenCEO CFO

EPIGENOMICS AG – INTERIM REPORT ON THE FIRST QUARTER OF 2012

3EPIGENOMICS 3-MONTH REPORT 2012 INTERIM CONSOLIDATED MANAGEMENT REPORT

4

FURTHER POSITIVE STEPS IN THE U.S. REGULATORY PROCESS FOR EPI PRO COLON®

Late last year, we initiated the process of gaining U.S. regula-t ory approval of our colorectal cancer (CRC) screening test Epi proColon® by submitting the first module of a modular PMA approval submission to the U.S. Food and Drug Ad-ministration (FDA). The first module of the submission includ-ed all required documentation on the manufacturing and quality controls section in relation to our product. The second module of our PMA submission was delivered to the agency in March 2012, including the sections in relation to the hard-ware and software validation of the instrumentation needed to run the test. The feedback from the FDA so far has been positive and the Company has meanwhile responded to add-itional questions and remarks brought forward by the FDA. The third module, relating to analytical validation, is scheduled to be submitted still in Q2 of 2012 and the final module, including all clinical data, is scheduled for submis sion in the second half of 2012.

As previously announced, a head-to-head comparative study with the goal of demonstrating non-inferiority of Epi proColon® to fecal immunochemical testing (FIT) will be an integral part of the clinical module. The design of the clinical study has been discussed with the FDA and upon finalization of the protocol, the study has meanwhile been initiated. After the reporting period, we announced the inclu-sion of the first study subject in April 2012. It is anticipated that this study will be completed in the second half of 2012. The clinical module of the PMA submission will encompass the results of this head-to-head comparative study, previously announced data from a clinical validation study in a cohort of prospectively collected samples and other clinical study results generated during the development of Epi proColon®.

On February 16, 2012, we announced the results from a study conducted in collaboration with Prof. Dr. Béla Molnár and his team from the Semmelweis University in Budapest, Hungary. In the study, the blood-based detection of methyl-ated Septin9 in CRC cases was assessed in the left and right side of the colon. In this study with 184 patients, the observ ed overall sensitivity for the detection of colorectal cancer amounted to 96% for overall CRC detection at a specificity of 85%. Sensitivity for detection of left- and right-sided cases was 96% and 94% respectively, thus showing no significant difference between cancer detection in either side of the colon, whereas other methods like colonoscopy and fecal testing typically fall behind in the detection for right-sided cancerous lesions.

On March 6, 2012, we announced the results of a survey on CRC screening preferences conducted by Jennifer Taber et al. (Department of Psychology, University of Utah, Huntsman Cancer Institute, ARUP Laboratories). Given the performance of the ARUP Septin9 test (90% sensitive, 89% specific; Warren et al. 2011) at a price of USD 180 for this test, the survey in-dicated that two thirds of previously unscreened individuals would prefer a Septin9 blood test to other screening methods.

MAIN EVENTS DURING Q1/2012

EPIGENOMICS 3-MONTH REPORT 2012 INTERIM CONSOLIDATED MANAGEMENT REPORT

5

EPIGENOMICS BIOMARKER PREDICTS DRUG RESISTANCE IN COLORECTAL CANCER

On January 5, 2012, we announced the publication of a study authored by Prof. Dr. Matthias Ebert, Medical Faculty Mann-heim of the University of Heidelberg, entitled “TFAP2E-DKK4 and Chemoresistance in Colorectal Cancer” in the January edition of “The New England Journal of Medicine“. In this study, involving more than 200 patients in four independent cohorts of patients, Prof. Dr. Ebert and his team demonstrat ed that hypermethylation of the TFAP2E gene was correlated with non-responsiveness to the commonly used chemothera-peutic agent 5-fluorouracil (5-FU). This is one of the first studies to identify a methylation-based biomarker for resist-ance to chemotherapy, and may provide doctors with inform-ation to allow a more informed choice of 5-FU-based chemo-therapy treatment selection for patients with colorectal cancer. We see this as a demonstration of the potential of bio-markers like TFAP2E identified by our DNA methylation discov ery technologies in supporting clinical decision-making regarding therapeutic measures.

EPI PRO LUNG® BL ASSAY SHOWS STRONG PERFORMANCE AS CONFIRMATION TEST FOR LUNG CANCER DIAGNOSIS

On February 14, 2012, we announced the results from a clinical study conducted by Prof. Dr. Manfred Dietel and his team (Charité Universitätsmedizin Berlin, Germany). In the reported study, the clinical performance of the Epi proLung® BL assay (based on our proprietary SHOX2 biomarker) was evaluated in bronchial lavage from patients suspected of having lung carcinoma. The results of this study will be presented by Prof. Dr. Dietel at the Annual Meeting of the German Association of Pathologists at the end of May 2012 in Berlin. Based on the study results, which independently con-firm the clinical utility of the Epi proLung® BL assay, Charité has announced that the assay will be introduced into its clinical practice as a routine aid in the diagnosis of lung can-cer in patients with negative or suspicious cytological results.

EPIGENOMICS AG PLANS CHANGES IN THE COMPOSITION AND SIZE OF ITS SUPERVISORY BOARD

On March 16, 2012, we decided to propose to our share-holders to vote in favor of a reduction of the size of the Super-visory Board from six to three members. Furthermore, the longstanding Chairman of the Supervisory Board, Prof. Dr. Dr. h.c. Rolf Krebs, announced that for personal reasons, he will not stand for re-election at the Annual General Shareholders’ Meeting (AGM) 2012. Therefore, the Supervisory Board resolv ed to propose Mr. Heino von Prondzynski (62) for elec-tion to the Supervisory Board by the AGM. This year‘s Annual General Shareholders’ Meeting, which took place after the reporting period on May 2, 2012, voted with vast majority in favor of the proposed changes in size and composition of the Supervisory Board.

Prof. Dr. Dr. h.c. Rolf Krebs (72) has been a member of the Supervisory Board of Epigenomics AG since 2000 and its Chairman since 2003. During his term of office, the Company has evolved from a privately held start-up research company to a publicly listed worldwide commercial leader in the field of blood-based prod ucts for the early detection of cancer.

Mr. von Prondzynski is an internationally recognized expert and accomplished business leader in the field of mo lecular diagnostics with an extensive network of contacts in the United States and Europe among others. Mr. von Prondzynski has been CEO of the diagnostics division of F. Hoffmann- La Roche Ltd., Basel, Switzerland, for several years and a member of the group executive committee of Roche. He is intimately acquainted with Epigenomics and its environment, having been a member of its Supervisory Board from May 2007 until March 2010.

In addition to Mr. von Prondzynski, current members Ms. Ann Clare Kessler, Ph.D., and Prof. Dr. Günther Reiter were re-elected to the Supervisory Board with vast majorities at the AGM on May 2, 2012.

On March 23, 2012, we announced full-year results for the year ended December 31, 2011, and provided an outlook for 2012.


6

OUR STOCK

In order to ensure comparability, market data as shown below has been adjusted retroactively taking into account the 5:1 consolidation of shares in August 2011.

Market data Mar 31, 2011 Jun 30, 2011 Sep 30, 2011 Dec 31, 2011 Mar 31, 2012

Number of shares outstanding 8,818,417 8,818,417 8,818,417 8,818,417 8,818,417

Closing price (in EUR) 8.95 5.95 4.26 1.30 2.22

Market capitalization (in EUR) 78,924,832 52,469,581 37,566,456 11,463,942 19,576,886

Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012

Average daily trading volume (units) 18,909 9,103 6,536 13,483 32,733

Highest price (in EUR) 9.95 9.15 6.65 4.62 3.55

Lowest price (in EUR) 7.75 5.60 3.41 1.30 1.21

Epigenomics AG – Common Shares Frankfurt Stock Exchange, Regulated Market (Prime Standard)

ISIN DE000A1K0516

Security code number A1K051

Stock exchange abbreviation ECX

Reuters ECXG.DE

Bloomberg ECX:GR

Designated sponsors ICF Kursmakler AG Wertpapierhandelsbank

equinet AG

Analyst coverage Edison Investment Research (Jacob Plieth, Robin Dawson)

equinet AG/ESN (Edouard Aubery, Martin Possienke)


FINANCIALS

FINANCIAL POSITION AND CASH FLOW

Cash outflow from operating activities was EUR 2.5 million in Q1 2012 – a decrease of at least EUR 0.3 million compared to Q1 2011, although this outflow included another EUR 0.3 million payments related to the restructuring in 2011 and increasing payments in connection with our FDA approval process. In the absence of no mentionable cash outflows for investing and financing activities, our net cash outflow in Q1 2012 added up to EUR 2.6 million (Q1 2011: EUR 3.0 million).

RESULTS OF OPERATIONS

Revenue in Q1 2012 of EUR 0.2 million was significantly lower than the comparable number of the previous year (Q1 2011: EUR 0.6 million), which had included a significant one-off payment from Qiagen when they were granted an option to a mSEPT9 license from us. Product revenue in Q1 2012 decreased only slightly compared to Q1 2011, explainable by our strategic decision to move the sales focus in Europe towards select key accounts.

Therefore, product sales were still in line with our expect-ations at this stage while collaborative R&D income was lagging behind our plans. Gross margin improved slightly from 76% in Q1 2011 to 80% in Q1 2012.

Other income of EUR 0.5 million in Q1 2012 improved significantly compared to the first three months of the previ-ous year (EUR 0.1 million). This rise was largely attributable to a reversal of provisions and accruals (mainly in connection with last year’s restructuring), to income from the sale of assets and to exchange rate gains.

R&D costs were down to EUR 1.4 million in Q1 2012 from EUR 1.6 million in Q1 2011 as a consequence of our retreat from early-stage research activities. The restructuring meas-ures in our marketing and sales departments were mainly the cause for the simultaneous year-over-year drop in our SG&A costs from EUR 1.6 million to now EUR 1.4 million in the three-month period of 2012.

Other expenses of EUR 0.1 million in the reporting period are mainly attributable to unscheduled amortization of develop-ment costs and late effects from the restructuring.

The negative EBIT of Q1 2012 amounts to EUR 2.3 million, equaling a 16.0% improvement compared with Q1 2011 (EUR -2.7 million) while the net loss of the reporting period added up to EUR 2.3 million – thus over EUR 0.5 million less than in the comparable period of 2011.

NET ASSETS POSITION

During Q1 2012, non-current assets decreased from EUR 4.0 million at December 31, 2011, to EUR 3.7 million at the re-porting date due to scheduled and unscheduled depreciation and amortization without significant new capital expend-itures at the same time. Simultaneously, current assets drop-ped from EUR 15.4 million at the end of 2011 to EUR 12.8 million at March 31, 2012. This decrease is mainly attribut-able to our cash consumption during the first three months of 2012. Therefore, total assets added up to EUR 16.6 million at the end of Q1 2012.

Total equity dropped to EUR 14.0 million on March 31, 2012 – down from EUR 16.2 million in our opening balance 2012 – as a result of our net loss for this reporting period. Current liabilities decreased from EUR 3.3 million at the end of 2011 to now EUR 2.5 million. This decrease is attributable to a reduced amount of trade payables at the reporting date on the one hand and a drop in other liabilities of more than EUR 0.4 million in the three-month period on the other, mainly due to settled accounts resulting from our restructur-ing measures in August 2011.

7EPIGENOMICS 3-MONTH REPORT 2012 INTERIM CONSOLIDATED MANAGEMENT REPORT

EPIGENOMICS 3-MONTH REPORT 2012 8

EMPLOYEES

Berlin Seattle Total

Number of employees as of March 31, 2012 40 6 46

Number of employees as of December 31, 2011 51 10 61

Number of employees as of March 31, 2011 71 14 85

The total headcount of 46 at the reporting date comprises of 23 employees in the R&D departments and 23 employees in selling, general and administration including one apprentice.

SUPPLEMENTARY REPORT

After the end of the reporting period, on May 2, 2012, Epigenomics AG held its Annual General Shareholders’ Meeting (AGM) in Berlin. All members of the Executive and the Supervisory Board were discharged from liability for the fiscal year 2011.

In addition, the AGM voted with vast majority for the reduc-tion of the Supervisory Board from currently six to three members in the future and a corresponding amendment to the Articles of Association. The current members of the Super-visory Board, including longtime chairman Prof. Dr. Dr. h.c. Rolf Krebs as well as the former Supervisory Board members Joseph Anderson, Ph. D., Prof. Dr. Dr. Dr. h.c. Uwe Bicker and Günter Frankenne did not stand for re-election to the Supervisory Board. The Supervisory Board members Ann Clare Kessler, Ph.D., and Prof. Dr. Günther Reiter were confirm ed by the AGM with large majorities for a further term. Mr. Heino von Prondzynski was also elected by a large majority as new member to the Supervisory Board. In its constitutive session immediately following the AGM, the newly elected Supervisory Board appointed Mr. von Prondzynski as its chairman.

All other topics proposed by the Company to the AGM were voted favorably with large majorities. Detailed information on this subject can be found on the Company‘s website (www.epigenomics.com).

OPPORTUNITIES AND RISKS

Opportunities and risks in relation to the Company’s business operations are described in detail in the consolidated management report published with the Annual Report 2011 which is available on the Company’s website (www.epigenomics.com).

PROGNOSIS REPORT FOR 2012

In line with our previous guidance, product sales from our IVD diagnostic products remained at a modest level during the first quarter of 2012. We continue to seek potential licens ing and distribution partners as well as key account customers. We expect our product-derived revenue to main-tain at low levels prior to the U.S. approval of Epi proColon® by the FDA, likely in the course of 2013. A major increase in revenue can only be expected once we are able to sell Epi proColon® directly in the U.S. market. While we expect EBIT and net loss to narrow in 2012 in comparison to 2011 due to the effect from the restructuring implemented in 2011, the necessity to invest into further clinical trials ahead of completion of our FDA submission will force us to secure additional resources to secure the continuation of our business. Our current financial resources are not sufficient to support the Company’s operations for the next two years. Since at the current time it is not anticipated that we will be able to generate sufficient cash flows from licensing income or from product sales in the short term, we will diligently explore all strategic options also available to the Company. These options include a capital market transaction. Given the volatility of the financial markets and the development of Epigenomics share price, we will also have to explore other strategic options for the further development of the Group.

INTERIM CONSOLIDATED MANAGEMENT REPORT

9

EUR thousand Q1 2011 Q1 2012

Revenue 621 243

Cost of sales -149 -49

Gross profit 472 194

Gross margin in % 76% 80%

Other income 59 486

Research and development costs -1,579 -1,447

Selling, general and administrative costs -1,602 -1,385

Other expenses -90 -149

Operating result (EBIT) -2,740 -2,301

Interest income 55 41

Other financial result -176 -42

Net loss for the period before taxes on income -2,861 -2,302

Taxes on income -29 -36

Net loss for the period -2,890 -2,338

Earnings per share (basic and diluted) in EUR1 -0.35 -0.27

GROUP INCOME STATEMENT FOR THE PERIOD FROM JANUARY 1 TO MARCH 31, 2012 (UNAUDITED)

1 In order to ensure comparability, the earnings per share for Q1 2011 have been adjusted retroactively following the 5:1 consolidation of shares in

connection with the Company’s capital decrease in August 2011.

INTERIM CONSOLIDATED FINANCIAL STATEMENTSas of March 31, 2012

STATEMENT OF INCOME AND EXPENSES RECOGNIZED IN GROUP EQUITY FOR THE PERIOD FROM JANUARY 1 TO MARCH 31, 2012 (UNAUDITED)



Fair value adjustment of securities 141 114

Total income and expenses recognized in Group equity 141 114

Total comprehensive income -2,749 -2,224

INTERIM CONSOLIDATED

FINANCIAL STATEMENTS

EPIGENOMICS 3-MONTH REPORT 2012

10

ASSETS EUR thousand Dec 31, 2011 Mar 31, 2012

Non-current assets

Intangible assets 3,322 3,084

Tangible assets 506 460

Deferred taxes 214 191

Total non-current assets 4,042 3,735

Current assets

Inventories 283 253

Trade receivables 211 204

Marketable securities 1,428 1,542

Cash and cash equivalents 12,557 9,977

Other current assets 942 839

Total current assets 15,421 12,815

Total assets 19,463 16,550

GROUP BALANCE SHEET AS OF MARCH 31, 2012 (UNAUDITED)

EQUITY AND LIABILITIES EUR thousand Dec 31, 2011 Mar 31, 2012

Equity

Subscribed capital 8,818 8,818

Capital reserve 22,212 22,259

Retained earnings 1,303 -14,272


Other comprehensive income -572 -458

Total equity 16,186 14,009

Current liabilities

Trade payables 1,228 850

Deferred income 0 6

Other liabilities 1,013 583

Provisions 1,036 1,102

Total current liabilities 3,277 2,541

Total equity and liabilities 19,463 16,550

EPIGENOMICS 3-MONTH REPORT 2012 INTERIM CONSOLIDATED


11EPIGENOMICS 3-MONTH REPORT 2012


Cash and cash equivalents at the beginning of the period 24,554 12,557

Operating activities

Net loss for the period before taxes on income -2,861 -2,302

Corrections for:

Depreciation on tangible assets 66 49

Amortization of intangible assets 95 246

Losses from the disposal of assets 0 1

Stock option expenses 22 47

Foreign currency exchange results 23 2

Interest income -55 -41

Taxes -10 -15

Operating result before changes in net current assets -2,720 -2,013

Changes in trade receivables and other current assets -2,141 138

Changes in inventories 56 30

Changes in current liabilities from operating activities 1,964 -712

Liquidity earned from operating activities -2,841 -2,557

Interest received 5 14

Cash flow from operating activities -2,836 -2,543

Investing activities

Payments for investments in tangible assets -56 -4

Proceeds from sales of tangible assets 5 0

Payments for investments in intangible assets -16 -8

Additions to capitalized development costs -115 0

Cash flow from investing activities -182 -12

Financing activities

Payments for lease financing -7 0

Other financing-related payments 0 -25

Cash flow from financing activities -7 -25

Cash flow total -3,025 -2,580

Cash and cash equivalents at the end of the period 21,529 9,977

GROUP CASH FLOW STATEMENT FOR THE PERIOD FROM JANUARY 1 TO MARCH 31, 2012 (UNAUDITED)




EUR thousand

Subscribed

capital

Capital

reserve

Retained

earnings

Net loss for

the period

Other com-

prehensive

income

Groupequity

Dec 31, 2010 44,092 22,078 -22,494 -11,476 -905 31,295

Total comprehensive income 0 0 0 -2,890 141 -2,749

Transfer of net loss for the year 2010 to

retained earnings 0 0 -11,476 11,476 0 0

Stock-based compensation 0 22 0 0 0 22

March 31, 2011 44,092 22,100 -33,970 -2,890 -764 28,568

Dec 31, 2011 8,818 22,212 1,303 -15,575 -572 16,186

Total comprehensive income 0 0 0 -2,338 114 -2,224

Transfer of net loss for the year 2011 to

retained earnings 0 0 -15,575 15,575 0 0

Stock-based compensation 0 47 0 0 0 47

March 31, 2012 8,818 22,259 -14,272 -2,338 -458 14,009

STATEMENT OF CHANGES IN GROUP EQUITY AS OF MARCH 31, 2012 (UNAUDITED)



13NOTES EPIGENOMICS 3-MONTH REPORT 2012

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS

BASIC INFORMATION, PRINCIPLES AND METHODS

GENERAL PRINCIPLES

The presented unaudited interim consolidated financial statements of Epigenomics AG were prepared

according to the International Financial Reporting Standards (IFRSs) of the International Accounting

Standards Board (IASB), London, and the interpretations of the International Financial Reporting Inter-

pretations Committee (IFRIC) under consideration of IAS 34 Interim Financial Reporting in effect at the

closing date March 31, 2012, as mandatory applicable in the European Union. Further, these statements

are in accordance with German Accounting Standards (GASs) under consideration of GAS 16 Interim

Financial Reporting. New standards adopted by the IASB and/or the German Accounting Standards

Committee (GASC) apply from the date on which they came into effect. A critical review of this interim

report was performed by the Company’s auditor.

Amendments to the following Standards were mandatorily adopted during the reporting period:

■■ IFRS 1: First-time Adoption of International Financial Reporting Standards:

Severe Hyperinflation, Fixed Dates;

■■ IFRS 7: Financial Instruments – Disclosures: Transfers of Financial Assets

■■ IAS 12: Income Taxes: Recovery of Underlying Assets.

The adoption of these amendments did not have a material impact on the Group’s accounting.

The reporting period as defined in these interim consolidated financial statements is the period from

January 1, 2012, to March 31, 2012. The reporting currency is the euro (EUR).

The Group Income Statement has been prepared using the cost of sales method.

CONSOLIDATION GROUP

The consolidation group remained unchanged compared to the one as of December 31, 2011, and

comprises the two companies Epigenomics AG, Berlin, Germany, and Epigenomics, Inc., Seattle,

WA, U.S.A.

CONSOLIDATION, ACCOUNTING AND VALUATION PRINCIPLES

The presented unaudited interim consolidated financial statements should be read in connection with the

audited consolidated financial statements of Epigenomics AG for the year ended December 31, 2011. The

consolidation, accounting and valuation principles presented in those statements were still valid during

the reporting period unless explicitly mentioned otherwise below.

All intercompany transaction results, revenue, expenses, profits, receivables, and payables between the

Group companies were eliminated in full upon consolidation.

CURRENCY TRANSLATION

Applied foreign currency exchange rates in the reporting period:

Reporting date rates Dec 31, 2011 Mar 31, 2012

EUR/USD 1.2939 1.3356

EUR/GBP 0.83530 0.83390

EUR/CAD 1.3215 1.3311

Average rates Q1 2011 Q1 2012

EUR/USD 1.3911 1.3325

EUR/GBP 0.86580 0.83763

EUR/CAD 1.3666 1.3242


NOTES TO THE GROUP INCOME STATEMENT

REVENUE

Revenue source by revenue type:

Q1 2011 Q1 2012

EUR thousand in % EUR thousand in %

Product sales (own and third party) 155 24.9 125 51.2

Licensing income 455 73.2 114 47.0

R&D income 11 1.9 4 1.8

Total revenue 621 100.0 243 100.0

Revenue source by geographical market:

Q1 2011 Q1 2012

EUR thousand in % EUR thousand in %

Europe 454 73.1 137 56.3

North America 113 18.1 76 31.2

Rest of the world 54 8.8 30 12.5

Total revenue 621 100.0 243 100.0

OTHER INCOME


Income from the reversal of provisions 0 382

Foreign currency exchange gains 6 43

Income from the sale of assets 9 41

Income from option exercises 6 18

Third-party research grants 29 0

Corrections of invoices of previous years 5 0

Other 4 2

Total other income 59 486


16

COST ANALYSIS

Q1 2011 EUR thousand Cost of sales R&D costs SG&A costs Total

Materials and consumables 77 160 11 248

Depreciation and amortization 3 132 26 161

Personnel costs 14 936 732 1,682

Other costs 55 466 833 1,354

Capitalized development costs 0 -115 0 -115

Total 149 1,579 1,602 3,330

Q1 2012 EUR thousand Cost of sales R&D costs SG&A costs Total

Materials and consumables 26 140 20 186

Depreciation and amortization 1 266 28 295

Personnel costs 4 541 742 1,287

Other costs 18 500 595 1,113

Capitalized development costs 0 0 0 0

Total 49 1,447 1,385 2,881

OTHER EXPENSES


Unscheduled amortization 0 78

Corrections for former periods 0 33

Restructuring expenses 0 21

Foreign exchange rate losses 90 15

Other 0 2

Total other expenses 90 149

NOTES EPIGENOMICS 3-MONTH REPORT 2012

EARNINGS BEFORE INTEREST AND TAXES (EBIT) AND EBIT BEFORE DEPRECIATION AND AMORTIZATION (EBITDA)

EUR thousand Q1 2011 Q1 2012 Variance in %

EBIT -2,740 -2,301 16.0

Depreciation 66 49 25.8

Amortization 98 246 -157.6

EBITDA -2,579 -2,006 22.2

FINANCIAL RESULT


Interest and related income 55 41

Total financial income 55 41

Other financial expenses -176 -42

Total financial expenses -176 -42

Total financial result -121 -1

TAXES ON INCOME


Current tax expenses 12 21

Deferred tax expenses 17 15

Total taxes on income 29 36


18

EARNINGS PER SHARE2

The earnings per share (basic and diluted) are calculated by dividing the Group’s net loss for the period by

the weighted-average number of shares issued and admitted to trading in the respective period.

Q1 2011 Q1 2012

Net loss for the period in EUR thousand -2,890 -2,338

Weighted-average number of shares issued 8,818,417 8,818,417

Earnings per share (basic and diluted) in EUR -0.35 -0.27

The outstanding stock options granted by the Company are anti-dilutive according to IAS 33.41 and

33.43. Therefore, the earnings per share (diluted) equal the earnings per share (basic). The number of

shares issued as of the reporting date amounted to 8,818,417 (March 31, 2011: 8,818,417).

2 In order to ensure comparability, the number of shares and consequently the earnings per share for Q1 2011 have been adjusted retroactively

following the 5:1 consolidation of shares in August 2011.


19

NOTES TO THE GROUP BALANCE SHEET

NON-CURRENT ASSETS

EUR thousand Dec 31, 2011 Mar 31, 2012

Software 173 165

Licenses, patents 296 283

Development costs 2,853 2,636

Total intangible assets 3,322 3,084

Fixtures 7 7

Technical equipment 462 418

Other fixed assets 37 35

Total tangible assets 506 460

Deferred tax assets 214 191

Total non-current assets 4,042 3,735

CURRENT ASSETS


Inventories 283 253

Trade receivables 211 204

Marketable securities 1,428 1,542

Cash and cash equivalents 12,557 9,977

Prepaid expenses 576 522

Receivables from tax authorities 205 170

Interest receivables 27 54

Claims based on granted projects 84 51

– thereof: claims against public authorities 84 51

Advance payments 8 0

Other 42 42

– thereof: with a maturity > 1 year 38 38

Total other current assets 942 839

Total current assets 15,421 12,815


20

EQUITY

Equity decreased in the first three months by EUR 2.2 million, mainly due to the net loss for the period.

As of March 31, 2012, the subscribed capital of EUR 8,818,417 remained unchanged compared to the

year-end 2011.

CURRENT LIABILITIES

Deferred income


Payments received for commercial collaborations 0 6

Total deferred income 0 6

There are no repayment obligations for the Company resulting from deferred income.

Other liabilities


Payables due to staff 390 177

Accrued audit fees 105 124

Payables due to tax authorities 218 81

Payables for onerous rental agreements 251 63

Accrued Supervisory Board fees 4 43

Liabilities from derivative instruments 2 43

Down payments received 35 30

Payables due to social security institutions 2 19

Other 6 3

Total other liabilities 1,013 583

Payables due to staff of EUR 177 thousand as of March 31, 2012, include restructuring-related payment

obligations in the amount of EUR 8 thousand.


21

Provisions


Provisions for onerous rental agreements 704 672

Other contract-related provisions 188 188

Payroll provisions 97 178

Provision for Annual General Shareholders’ Meeting 40 59

Other provisions 7 5

Total provisions 1,036 1,102

Provisions for onerous rental agreements of EUR 672 thousand were set up in connection with the

Company’s restructuring plans.

NOTES TO THE GROUP CASH FLOW STATEMENT

OPERATING ACTIVITIES

Cash flow from operating activities is derived indirectly on the basis of the net loss for the period before

taxes on income. Cash comprises bank deposits and cash in hand. Cash equivalents are defined as

instruments being convertible on a short-term basis to a known amount of cash and carrying a very low

risk of changes in value.

INVESTING ACTIVITIES

Cash flow from investing activities is ascertained in respect of payment.

FINANCING ACTIVITIES

Cash flow from financing activities is ascertained in respect of payment.

CASH CONSUMPTION

The total of cash flow from operating activities and cash flow from investing activities less transactions in

securities is monitored by the Company as ”cash consumption“ key figure.


Cash flow from operating activities -2,836 -2,543

Cash flow from investing activities -182 -12

Net proceeds from transactions in securities 0 0

Cash consumption -3,018 -2,555


22

OTHER INFORMATION

INFORMATION ON OTHER TRANSACTIONS WITH RELATED PARTIES

No transactions with related parties took place during Q1 2012.

SHAREHOLDINGS OF BOARD MEMBERS IN EPIGENOMICS AG (AS OF MARCH 31, 2012)

(all numbers of shares and stock options were adjusted to the share capital after the capital decrease)

Number of shares Number of stock options

Executive Board 14,000 217,000

Geert Walther Nygaard 12,000 137,000

Dr. Thomas Taapken 2,000 80,000

Supervisory Board 2,800 0

Ann Clare Kessler, Ph.D. 2,800 0

CHANGES IN STOCK OPTIONS

A total number of 60,000 stock options each was granted to the Company’s Executive Board members

Geert Walther Nygaard and Dr. Thomas Taapken in Q1 2012. Another 80,000 stock options were granted

to employees of the Company in the reporting period. No stock options were exercised during the first

three months of 2012. The total number of stock options held by the members of the Executive Board

as of March 31, 2012, amounted to 217,000 and the total number of stock options held by other

beneficiaries amounted to 297,356.

This interim report has been approved and cleared for publication by the Executive Board of the Company on May 2, 2012.

Berlin, May 2, 2012

The Executive Board



DISCLAIMERThis interim report expressly or implicitly contains certain forward-looking statements concerning

Epigenomics AG and its business. Such statements are not historical facts and sometimes are expressed

by the words “will”, “believe”, “expect”, “predict”, “plan”, “want”, “assume” or similar expressions.

Forward-looking statements are based on current plans, estimates, prognoses and expectations of the

Company and on certain assumptions, and they involve certain known and unknown risks, uncertainties

and other factors which could cause the actual results, financial condition, performance or achievements

of Epigenomics AG to be materially different from any future results, performance or achievements ex-

pressed or implied by such forward-looking statements.

Readers of this interim report are explicitly warned not to inadequately trust these forward-looking state-

ments, which are only valid as of the date of this interim report. Epigenomics AG does not intend to and

will not undertake to update any forward-looking statements contained in this interim report as a result

of new information, future events or otherwise.

DISCLAIMER

CORPORATE CALENDAR 2012

6-Month Report 2012 January 1 – June 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, August 8, 2012

9-Month Report 2012 January 1 – September 30 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wednesday, November 7, 2012

CONTACT

Antje Zeise, CIRO Manager Investor Relations

Phone: +49 (0) 30 24345-0 Fax: +49 (0) 30 24345-555 [email protected]

This interim report is also available on the Company’s website (www.epigenomics.com) in both a German and an English version.

3-month report january 1 – march 31 q1 2012 · epigenomics 3-month report 2012 interim...

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